Productivity: Key Economic Indicators

One of the most important factors in determining living standards is productivity – how much output is produced for a given input (such as an hour of work).

The more efficient the economy is, the more that can be produced in a sustainable fashion. In other words, higher productivity growth leads to a higher long-term growth rate of the economy.

Economic theory states that labour productivity also determines wages: the more productive an employee is, the more they are likely to be paid.

UK productivity

Historically, UK labour productivity has grown by around 2% per year but since the 2008/2009 recession it has stagnated. The level of labour productivity in Q3 2017 was 0.7% above what it was over nine years earlier in Q4 2007 (the pre-recession peak level).

Productivity across the whole UK economy increased by 0.9% in Q3 2017 compared with the previous quarter – the fastest quarterly growth since Q2 2011 – and was 0.6% higher compared with a year before in Q3 2016.

International comparisons

In 2016, ranked on GDP per hour worked, the UK came fifth highest out of the G7 countries, with Germany top and Japan bottom. UK productivity was 15% below the average of the rest of the G7 countries, the same gap as in every year from 2012 and the largest since at least 1995 (when the ONS data series began).